Merger and acquisition ppt

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Merger and acquisition:

Merger and acquisition

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The phrase mergers and acquisitions (abbreviated M&A ) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.

Merger meaning…..!:

Merger meaning…..! The combination of two or more organizations, such as cities or corporations, into one; see merger (politics) and mergers and acquisitions respectively.

Acquisition may refer to: :

Acquisition may refer to: Takeover , the acquisition of a company Mergers and acquisitions , strategy of buying and selling of various companies to quickly grow a company

Acquisition meaning….!:

Acquisition meaning….! An acquisition , also known as a takeover or a buyout or "merger", is the buying of one company (the ‘target’) by another.

M&A differentiation….!:

M&A differentiation….! "merger", which can be achieved independently of the corporate mechanics through various means such as "triangular merger", statutory merger, acquisition, etc.] When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition

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In the pure sense of the term, a merger happens when two firms agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". The firms are often of about the same size. Both companies' stocks are surrendered and new company stock is issued in its place.

For example,:

For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline , was created.

Motives behind M&A :

Motives behind M&A

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The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. The following motives are considered to improve financial performance:

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1) Economy of scale : This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.

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2) Economy of scope : This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products.

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3) Increased revenue or market share : This assumes that the buyer will be absorbing a major competitor and thus increase its market power (by capturing increased market share) to set prices.

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4) Cross-selling : For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products.

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5) Synergy : For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.

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6) Taxation : A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to "shop" for loss making companies, limiting the tax motive of an acquiring company.

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7) Geographical or other diversification: This is designed to smooth the earnings results of a company, which over the long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the company. However, this does not always deliver value to shareholders

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